Councils across Britain are taking steps to make sure that their local economy grows. But what happens if you are in an area that is shrinking, losing jobs and population, as well as local taxes?

Local economic development strategies in shrinking towns and cities all seek a return to growth. They have come to rely on an increasingly common formula: tourism, creative industries and the knowledge economy.

Branding and marketing strategies have attempted to change external perceptions of former industrial, fishing and mining communities and transform them into desirable destinations for incoming workers. These city branding exercises are often met with hostility from long-term residents who object to the appropriation of their culture and values.

One of the most bizarre recent examples is the rebranding of Belfast as the home of the Titanic. Though some of these repositioning projects misfire, there are certainly success stories: coastal towns in Kent and Sussex that had been showing signs of decline have demonstrated that arts and cultural regeneration can work well, especially when it takes place a short distance from a large affluent population in London.

However, the formula of tourism, creative industries and a knowledge economy is not a solution for every area that is losing jobs and population. So, is there another answer?

Perhaps we can learn from some of the difficult lessons faced by our European neighbours. For some towns and cities, shrinkage is not a term to be shied away from but rather a concept to be embraced. In Ireland, creative efforts to find uses for empty apartments have included joining two small apartments to create family-sized accommodation, sheltered housing for the elderly and even plans to turn partially built apartments into urban allotments.

The German town of Altena in the former industrial region of North Rhine-Westphalia has experienced the highest population loss in former west Germany. In the 1970s, it was home to more than 32,000 residents but the population has dropped to just 18,000. Altena's economic base in metalworking was badly affected by cheaper products from elsewhere and this led to business closures and job losses. Previous strategies to improve the town's fortunes had failed to deliver long-term results. A large new shopping centre revived the town for the first decade, but then shoppers began to turn away from the increasingly run-down town centre and drive 40 minutes to Dortmund instead.

The loss of population left many services out of scale with the smaller town. Difficult decisions were made to close primary schools and kindergartens (nurseries). However, this hasn't necessarily been bad news for local residents. Some of the money saved has been reinvested in the existing kindergartens, allowing them to stay open longer to make things easier for working parents.

Most shrinking towns have some underdeveloped natural features. For example, the potentially attractive area by the river in Altena was marred by heavy traffic and a bus interchange. The bus interchange was moved and the shopkeepers, local residents and even the town mayor worked themselves to lay new paving to create a pleasant, pedestrian-friendly environment.

When asked about growth, the mayor of Altena is sceptical. He sees benefits in accepting that the town should learn to live with its smaller population and instead focus on creating a good quality of life and new opportunities for its residents.